Banks Struggle To Overcome Mobile Deposit Fraud

As deposit-by-smartphone becomes more popular, banks and imaging vendors are looking for new ways to block a new type of fraud: customers cashing a check more than once, American Banker reported.

Because customers keep the physical check after depositing it by taking a photo with a mobile phone, banks run the risk of “serial deposit” fraud — customers cashing the same check at another bank or check-cashing service, either intentionally or by accident.

So far, such fraud is minimal and financial institutions use holds and deposit limits to mitigate fraud. But banks and vendors are looking for better solutions.

One tactic is to use image-scanning technology that looks for a restrictive endorsement required by the bank to be used on the back of the check, such as “For deposit only at XYZ bank.” Imaging vendors Mitek, Top Image Systems and Kofax offer such scanning functions in their systems. But some customers have terrible handwriting that makes automated scanning for such handwritten endorsements difficult. Another problem: Image analytics systems can’t yet determine whether the back of the check is attached to the front, so a fraudster could endorse a false back, mobile-deposit the check, then remove the back and deposit it again.

Another approach is to use an electronic clearinghouse such as Early Warning Services, a bank-owned organization that traps each check’s routing number, account number, dollar amount and check serial number to alert banks of duplicate deposits. But to work, that requires widespread use by banks of a single anti-duplication service.